Posts from February 2013

Like last week's post on mobile revenue models, gaming isn't a revenue model itself, but it does offer a number of interesting revenue models and is worth discussing in a post in this series. This is the last post in the revenue model series, which is based on the peer produced revenue model hackpad we created at the start of the series.

Gaming is interesting because there are a number of revenue options that game developers can choose from when thinking about how to make money from their game. The hackpad lists the following:

There is still a sizeable business in selling a version of the game to the game player. That's how the console game (xbox, etc) market works. It is also how downloadable games market works. And there is a vibrant market in mobile games that you have to pay for to play.

But the games market has been moving to newer models in recent years. In app upgrades is certainly one of the more important revenue models. Many of the most popular mobile games are free to play but offer in app upgrades to get more game elements or simply to eliminate the ads. This is an example of the freemium business model in action.

Advertising is another important revenue model. For many web based games, advertising is the dominant form of revenue. On mobile, advertising supports the free offer and the elimination of advertising is often the value proposition for the in app upgrade.

The revenue model that is mostly (but not totally) unique to gaming is virtual goods. Virtual goods (like a tractor in Farmville) allow the player to have more capability in the game and they can be earned over time but are often purchased to enhance game play. This revenue model was inititally created in the asian gaming market but has been adopted by game developers all over the world.

I have been waiting for non gaming web and mobile services to adopt the virtual goods model but have yet to see anything that feels like it is working really well. Virtual goods is another excellent implementation of the freemium approach to business model.

There are game developers who use all of these models at the same time. They might sell their game on certain platforms, they might offer a free ad supported version on mobile with in app upgrades and virtual goods. In many ways, I think the gaming market is the most sophisticated about revenue models of all the sectors in web and mobile. That may stem from the fact that most games have a finite life and so the developer has to extract real revenue quickly to get a return on the investment they have made in developing the game. I think there is a lot that the rest of the web and mobile services world can learn from the gaming market.

AVC regulars know that I am a long time Android user and a big fan of the Google mobile OS. A few months ago we turned on Google Now for our USV Google Apps account and I started getting Google Now on my phone.

At first, I didn't pay much attention to it. It's not in your face, which I like.

But last week, I got my first mobile notification from Google Now. I was at an event in SLC at The Leonardo. I had a dinner meeting in my calendar at 6:15. At roughly 6pm, Google Now sent me a mobile notification that I needed to leave because the place I needed to be at 6:15pm was a 9 minute drive. I was impressed. That's value add.

Then I started using Google Now a bit more. I've used it like Siri and it works really well. I've always thought Google's voice recognition on Android was excellent. I've mostly used it to compose text messages when I am out and can't focus on the phone to type. It works really well.

But Google's voice recognition, combined with Google Now, Google Maps, and Google Search is really impressive. I don't use Siri but my kids have all given it a try and mostly dropped it. I suspect Google Now might be better than Siri.

If you have an Android phone/OS that supports Google Now. I suggest you make sure it is turned on for your phone and that you give it a try. I think you will come away impressed. I sure was.

Related articles

How To Use Google Now, The Mobile Voice Assistant Putting Siri To Shame (GOOG)

Which is better, Siri or Google Voice Search?

Siri vs. Google Voice Search

Google Now for Android updated: Now it "gets" me

How to receive Google Now notifications in Google Chrome

Google Now Android App Adds Movie Ratings and More

I sat down with kbs+ Ventures late last year and they produced this interview which I think came out well. This video is part of a series on Creative Entrepreneurship that includes a book on the topic. The book is available for a free pdf download here.

Today we are going to talk about a new feature right here on AVC. It's been running for a day or so, so some of you may have already noticed it. Right next to the comments link, there is a new link that says "disqus commenter breakdown". It looks like this:

If you click on that you will get an alternative view of the comment thread – broken down by the most active commenters. You can scroll down, find the commenters you enjoy most, click on them, and read what they have to say.

Like many of the hacks featured on this blog, this was built by Kevin Marshall. He built it on top of the Disqus API.

I like applications that offer an API to developers to build alternative views for end users. And I think Disqus does this better than anyone else in the comment space.

Given how long and busy some of the comment threads are here on AVC, I can imagine a number of alternative views that one could construct that would be useful. If anyone else wants to hack on the Disqus API and create something useful, I am happy to give them similar real estate.

There was an interesting conversation in the comments to my Retention post that I thought I'd highlight.

I can't figure out how to look at frequency and recency data in google analytics by UV as opposed to total visits. So this analysis is probably flawed. If anyone knows how to do that, please let me know in the comments.

But assuming the analysis is not totally flawed, the loyal readership of AVC is between 200k and 400k out of a total of 1.7mm unique visitors last year.

That means only 10% to 25% of the total visitors are regulars. That's not particularly great retention from what I can tell. But I sure do appreciate all of you loyal readers.

Yesterday as I was getting off a plane, I saw this tweet on my phone and replied to it:

@jwklemanski yessssss @sai_tools @stevekovach

— Fred Wilson (@fredwilson) February 12, 2013

Jason probably tweeted that news at me because of the HBO No Go post from last August in which I expressed my exasperation that I could not airplay the HBO Go content from my iPad to my TV via  AppleTV. So that nuttiness has been addressed by HBO. Nicely done HBO.

But there's more to ask of them. It would be nice if the HBO Go app came pre-installed on connected devices like AppleTV, Roku, Boxee. It would also be nice if HBO Go supported AllShare so Samsung users could have the same thing that Apple users have.

HBO’s Eric Kessler said yesterday at an AllThingsD event that "Our long-term goal for Go is to be on all devices and all platforms." That is exactly right. That's what Netflix has done for years now and that is what HBO needs to do.

Slowly but surely HBO is evolving to being more like Netflix and that's a good thing for its subscribers. Now if we could only subscribe without having to go through a cable company. But we've already talked about that this month and I don't expect that to happen so quickly for all the reasons we discussed in the comments to that post.

Related articles

HBO vs Netflix

HBO Will Finally Let You Stream HBO Go To Your Apple TV Via AirPlay

HBO Go gains AirPlay streaming, Apple TV app due later this year

HBO comes to Apple TV via AirPlay on the updated HBO Go App

HBO GO Is Coming To Apple TV Starting Today If You Use AirPlay (AAPL)

HBO Go 2.0 finally allows AirPlay streaming to Apple TV

I guess this should be a Feature Friday post but I write my posts based on what I am thinking about first thing in the morning and this is what I am thinking about right now.

I just went to Twitter like I always do first thing in the morning and this is what I saw in my timeline:

Right at the top of my timeline, Twitter is telling me that my friend Mark is active again on his Mediaeater handle. And they follow that with the suggestion that I tweet at him. This is the first time I've seen this kind of messaging from Twitter. And I like it.

If you go back to my 30/10/10 post, you will see that most web services and mobile apps only get 30% of their registered users to use the app at least once a month. The other 70% have largely gone away. But it doesn't mean they are gone for good. Getting them back should be a primary goal of any consumer web or mobile company.

Twitter has been working on this problem for years. I recall getting a presentation from their growth team at least three years ago that detailed how they were working on this problem. And they are still working on this problem. Most likely they will always be working on this problem.

You can email or spam in some other way your inactive users and that might work. But what you do once they come back is way more important. You have to figure out how to make the experience better than it was when they used it previously. Some of that will likely be that the product is much better because your and your team have improved it a lot. But some of that should be an engaging experience that somehow they did not get before.

When we get our various portfolio companies together, I like to ask them if they can identify one or two metrics that separates their successful and engaged users from their unsuccessful and inactive users. Most of the time the metric has something to do with engagement (they left a comment, they got a reply to a comment, they got a like on their photo, they had people follow them, etc, etc). Engaging with real humans, not just the machine, is the key in social systems. And most systems are social in some way.

Your inactive users are important cohort to focus on. There must have been something that got them to sign up for your service in the first place. So focus on getting them back, retaining them, and most importantly, engaging them.

Related articles

Meet Retention Score, the new metric that predicts your customer churn

Think Tracking DAUs Is Enough? Then You're Not Getting Your Whole Mobile Story

What Twitter can teach you about growth hacking

The last two categories in the revenue model hackpad (mobile and gaming) are not really revenue models, they are sectors that have interesting revenue models worth discussing in this series. Today we will discuss mobile and next week we will discuss gaming.

Here is what we filled out for mobile in the revenue model hackpad:

Mobile offers revenue opportunities that the web does not for a few reasons. First, the downloadable app/app store model makes selling your software much easier on mobile than it is on the web. In 2012, almost $7bn of apps were sold in the iOS and Android app stores. Most of these purchases are being made as in app upgrades instead of initial purchases.

But as huge as app sales are, including in app purchases, I believe this will be the smallest of the big three mobile revenue models over time (app purchases, advertising, and transactions).

The mobile advertising market was estimated at around $3bn in 2012 but it is growing twice as fast as app purchases and is projected by Gartner to be over $20bn by 2015, a 90% annual compound growth rate (that compares to app purchases which are growing at about 30% per year).

I do not believe that we have yet cracked the code on mobile advertising. Mobile native approaches like Twitter's promoted tweets show the way. Interruption and "display" models aren't likely to work in mobile so we will need ad formats and solutions that are truly native in the mobile app and browser. The market is quickly innovating and I believe we will see a number of interesting models emerge this year which will cause the mobile ad market to grow quickly.

But as attractive as selling apps and running ads on them is, I believe the biggest and most attractive model in mobile is the transaction. Slowly but surely, our phone is becoming our wallet. And I don't mean wallet in the way that Google and PayPal think. I don't think we will necessarily have a mobile wallet. I think the apps on the phones will just have native transaction capability in them.

I have a friend who recently moved from NYC to SF and was back in NYC for a week of meetings. He told me he kept accidentally getting out of cabs without paying while he was in NYC. Using Uber in SF had trained him that once he had booked the ride on his phone, that was all he needed to do. Soon hopefully we will all be doing that with our Hailo app in NYC.

But that is just an example. Imagine if you could both checkin and checkout on your Foursquare app? Imagine if you could just walk into a movie or an airplane just using your phone (you can!). All of these things are possible without mobile wallets. The phone is our mobile wallet.

So I think transactions will be the biggest and most native form of monetization on mobile over time. That doesn't mean that you can't build a good business doing in app upgrades and mobile advertising. But it does mean that transactional networks on mobile is the biggest opportuntity in mobile that I see.

Next week, we will talk about gaming and then we will wrap this series on revenue models.

As some of you know, we have had an activist in residence at USV for the past year. His name is Nick Grossman and he has helped us to understand the public policy implications of the rise of networks that we are so actively investing in. The idea of a VC firm having an activist in residence has also produced outrage among those who dismiss the power of peer networks in our society.

Another sign of the coming Apocalypse? Venture capital firms now have “activists in residence”? This bio suggests so civic.mit.edu/users/nickgros…

— Evgeny Morozov (@evgenymorozov) February 7, 2013

One of the topics we have been thinking about and working on with Nick is the idea of regulation 2.0, a lighter weight regulatory paradigm than what we currently have. On thursday, Nick went down to Princeton and gave a talk about Regulation 2.0. His blog post with a video of his talk is here.

I think the slides will give you a good sense of what we are thinking about under the Regulation 2.0 framework.

I am excited about the possibilites of a more transparent world with less permission seeking and more innovation.